Within its fiberhoods, Google rules the roost, survey finds

Large numbers of people in Kansas City appear to be buying broadband to spare. Survey results from Bernstein Research, a Wall Street research firm, suggest Google Fiber is snaring much of the customer base in the growing number of neighborhoods where it sells TV and Internet hookups.

At its meeting Monday evening, the Overland Park City Council is poised to approve two agreements that would allow the California-based tech giant to bring super-high-speed Internet to the city. The proposals are similar to ones presented last September, but action on those was delayed.
File photoThe Kansas City Star

Large numbers of people in Kansas City appear to be buying broadband to spare.

Survey results from a Wall Street research firm suggest Google Fiber is snaring much of the customer base in the growing number of neighborhoods where it sells TV and Internet hookups.

Bernstein Research said its door-to-door survey of 350 homes also found most of those new customers buy Google’s light-speed service — paying $70 a month for more download and upload speed than they know what to do with.

That may reflect the particularly broadband-hungry corners of the market surveyed by Bernstein — some of Google’s most eager customers — and their desire to take the 1-gigabit-per-second Internet service for a spin.

The report noted that Kansas City’s early adopters largely pay more for Google’s stand-alone Internet than they do on conventional plans, despite having no obvious way to take advantage of surplus broadband.

“It is indeed hard to name many applications today that require the speeds delivered by Google Fiber. Moreover,” wrote Bernstein analyst Carlos Kirjner, “there are other bottlenecks” elsewhere on the Internet that limit how quickly data might flow to or from a Kansas City home.

Bernstein surveyed five neighborhoods, providing the most comprehensive look so far at how many people pay Google for Internet or cable-like TV service.

In some parts of Kansas City, Google Fiber sells Internet hook-ups to four of five homes that its network passes, Bernstein found.

Google Fiber will not say how many customers it’s corralled in the market.

In Google’s Wornall Homestead “fiberhood” — the company’s term for neighborhoods — between Brookside Boulevard and Wornall Road and roughly 57th to 63rd streets, Bernstein said 83 percent of homes pay to tap into the firm’s fiber optic network.

In the Community College fiberhood in Kansas City, Kan. — roughly bordered by State Avenue, Parallel Parkway, North 78th Street and College Parkway — about 27 percent of respondents subscribed to Google Fiber.

The research firm estimated Google will capture the business of half or more of the homes in qualified fiberhoods in three to four years. A Google spokeswoman said the company has no plans now to return to neighborhoods where it’s already completed installations.

So far, Google is finishing installations throughout Kansas City, Kan., and the central part of Kansas City. It’s also recently completed signing up customers in the southern stretches of Kansas City, Grandview and Raytown. It’s now recruiting customers in the Northland.

Google sets its own thresholds for the needed number of customers to justify construction. If too few customers sign up in a neighborhood, Google sells to no homes in the area.

Competitors have derided that approach, partly because previous franchise holders were required to offer their services across an entire city. Google, conversely, has built its business plan around expanding only where profitable pockets of customers are willing to subscribe.

“Google can cherry pick,” said Roger Entner of Recon Analytics. “You’d better have high penetration when you can cherry pick.”

Bernstein’s survey of 350 households also found general satisfaction with Google Fiber. Most customers said they’d recommend the service to others and would not switch back to other Internet providers, even if those companies matched the newcomer’s broadband speed and price.

Again, Entner said Google starts with some advantages over companies that suffer from poor reputations for customer service. “The cable companies are setting the bar pretty low,” he said.

Bernstein acknowledged its survey could be slightly skewed. It polled people in neighborhoods that have had service the longest. Google started its installations in neighborhoods where the most residents expressed interest. That suggests those earliest customers may have been excited about Kansas City’s first-in-the-country rollout of the service.

The research firm said Google’s competitors in Kansas City, chiefly Time Warner Cable and AT&T, won’t say how much business they’re losing to the new kid on the block.

“The incumbent cable and telephone have not said anything actually useful (because) they are losing large share in the very early Google Fiber neighborhoods,” the report said.

Time Warner Cable said in an email Tuesday that the company has 275,000 customers in the Kansas City area, “not just select neighborhoods, and we remain focused on connecting people to the things that matter most through reliable technology and superior service.”

The Bernstein survey also gave a peek at what level of service customers are most likely to buy.

Its most popular package, according to the Bernstein numbers, is stand-alone ultra-fast Internet. Google sells that for $70 a month on yearly contracts and promises both upload and download speeds of 1 gigabit per second, nearly 100 times faster than the norm for home Internet connections.

That hints at several possibilities, said cable industry analyst Larry Gerbrandt of Media Valuation Partners: Online gamers searching for speed; customers wanting to avoid buffering of Netflix videos; customers sticking with cable for TV and phone, but searching for faster Internet.

“It does indicate that some customers want to try a much faster Internet,” he said.

Google also sells the faster Internet bundled with a conventional TV service — one that lacks the popular channel AMC but that can deliver eight programs simultaneously and with large DVR and online data storage. That starts at $120 a month and requires a two-year contract.

Equally popular, says Bernstein, is Google Fiber’s “free” service. For a $300 installation fee, payable in monthly payments of $25 for the first year, customers get up to seven years of service. But the speeds are far slower — downloads of 5 megabits per second and uploads at 1 megabit per second.

Since Google announced plans to build in Kansas City, its competitors have been offering increasingly faster speeds in this market and elsewhere.

AT&T recently announced it is considering Kansas City and several markets for deploying Internet speeds that match Google by stringing fiber optic lines directly to homes, as Google is doing.